Kate
Lin:
Welcome
to
Morningstar.
Artificial
Intelligence
(AI)
has
been
investors’
favorite
theme
so
far
this
year.
On
the
back
of
a
positive
outlook
for
AI
applications,
internet,
software
and
semiconductor
chip
stocks
all
climbed
higher
for
the
year.
But
in
more
recent
trading
days,
these
stocks
seem
to
have
plateaued.
But
have
they?
Steve
Wreford
from
Lazard
Asset
Management,
who
is
managing
Lazard
Global
Thematic
Focus
Fund,
is
joining
us
today.
Steve,
thank
you
so
much
for
joining
us.
Will
AI
Dominate
2024
Too?
So
AI
has
been
the
most
popular
theme
among
investors.
Do
you
think
it
will
continue
this
way
and
how
is
your
multi-theme
strategy
playing
this?
Steve
Wreford:
Well,
certainly
artificial
intelligence
has
been
the
theme
of
2023.
The
market
has
become
obsessively
focused
on
a
relatively
small
number
of
names,
and
realistically
in
the
short
term,
I
do
think
that
we
are
cresting
the
peak
here
of
a
short-term
hype
cycle.
Now
longer
term,
there
are
great
opportunities
in
AI,
but
in
our
view,
investors
need
to
think
more
clearly
about
where
we
go
next.
A
broader
range
of
applications
of
AI
to
many,
many
industries.
And
we
have
AI
exposure
across
a
number
of
the
six
themes
in
GT
Focus.
Everything
from
AI
in
the
consumer
world,
where
we’re
facing
a
future
where
every
app
on
your
phone
will
have
AI
embedded
within
it,
through
to
areas
like
the
industrial
world
where
we
think
that
AI
is
going
to
be
very,
very
important
in
the
factory.
And
also
then
of
course
on
day-to-day
applications
such
as
those
office
productivity
tools
that
we
use
every
day
in
terms
of
software,
and
we’re
definitely
seeing
AI
being
embedded
in
there
as
well.
So
lots
and
lots
of
opportunities,
but
we
may
need
to
look
beyond
the
obvious.
KL:
And
with
AI
applications
and
even
the
broader
technology
space,
the
reality
is
that
volatility
may
be
looming,
given
the
tighter
financing
situation
and
concerns
about
an
economic
recession
that
we
are
seeing,
probably
starting
from
Europe.
What
is
your
view?
SW:
So
I
think
that
what
you
see
there
really
is
that
I
do
agree
with
you
that
there’s
a
chance
here
that
AI
and
the
broader
stock
market
as
a
whole
may
be
a
little
bit
ahead
of
itself
in
the
short
term.
I
think
probably
we
have
a
more
positive
view
than
consensus
on
the
direction
of
the
economy
as
we
go
through
2024.
I
think
that
that
reflects
the
fact
that
we
are
probably
more
positive
on
both
earnings
and
multiples.
In
other
words,
I
think
that
the
current
recessionary
fears
are
largely
baked
into
stock
prices
already.
So
in
our
view,
looking
forward
from
here,
we’re
probably
more
positive
on
equities
than
the
market.
We
just
need
to
be
a
bit
careful
about
which
parts
of
the
equity
market
we
are
exposed
to.
How
Can
Industrial
Be
‘Smart’?
KL:
Right.
And
let’s
talk
about
your
portfolio.
Another
sector,
other
than
technology
or
very
growth-driven
areas,
you
are
heavily
invested
in
industrials.
So
what
themes
do
this
part
of
the
economy
or
sector
fit
into?
SW: So
we
have
a
theme
called
smart
capex
(capital
expenditure),
and
that’s
based
on
two
theories
effectively
that
we
hear
from
companies.
The
first
of
those
is
that
we
believe
that
for
lots
of
reasons,
capital
expenditure
by
companies,
capex,
is
going
to
be
structurally
higher
over
coming
years.
And
that’s
because
of
areas
such
as
deglobalisation
as
we
rebuild
factories
closer
to
home,
areas
like
net-zero
and
sustainability
where
we
need
to
build
new
and
more
efficient
factories,
and
automation
as
we
see
labor
costs
rise,
companies
need
to
find
ways
of
making
their
employees
more
productive
and
automation
is
the
way
to
do
that.
So
there’s
lots
of
reasons
why
capex
is
going
to
be
higher,
but
also
we
need
to
think
that
capex
is
going
to
be
smart.
We
think
that
we’re
going
to
be
putting
the
latest
technologies,
including
AI
but
also
including
a
range
of
different,
you
know,
robotics
and
so
on
into
these
factories.
So
a
combination
of
these
smart
capex
is
I
think
a
theme
where
industrials
could
do
really,
really
well.
And
just
to
add
to
that
by
the
way,
at
the
moment
a
number
of
industrial
companies
are
facing
near
term
pressure
from,
for
example,
a
slowing
Chinese
market
or
destocking
and
removing
inventories
from
the
rest
of
the
world.
But
these
are
just,
I
think,
temporary
slowdowns
and
it’s
an
interesting
opportunity
to
buy
into
a
really
good
long-term
theme
at
a
moment
of
cyclical
weakness.
What
Secular
Themes
Are
Appealing
Other
Than
AI?
KL:
And
lastly,
for
the
benefit
of
our
viewers,
we
want
more
themes
from
you
apart
from
AI.
So
what
are
the
themes
are
you
following
and
that
you
think
will
stay
relevant
for
2024
and
beyond?
SW:
So
our
themes
evolve
slowly,
over
time
and
we
source
them
from
over
4000
company
meetings
every
year.
So
we
effectively
find
our
ideas
from
talking
to
company
management.
And
one
of
the
things
that
we
do
see
there
is
that
there
are
still
plenty
of
long-term
themes
emerging.
We
just
need
to
make
sure
that
we
are
focused
on
the
right
part
of
the
market
to
benefit
from
that.
If
I
could
give
you
an
example,
when
we’re
looking
at
an
area
like
electric
vehicles,
electric
vehicles
are
still
going
to
be
a
very,
very
strong
part
of
the
market
for
coming
years.
We
think
growth’s
going
to
be
great,
but
a
big
question
for
us
is
who’s
going
to
win?
Is
it,
will
it
be
a
Tesla
or
will
it
be
one
of
the
German
manufacturers
or
will
it
be
a
Chinese
manufacturer?
You
know,
we
don’t
know
ultimately
who’s
gonna
win
in
terms
of
the
end
market.
But
what
we
do
know
is
that
many
of
those
manufacturers
use
the
same
components,
common
components.
So
an
easier
way
to
play
the
theme
of
electric
vehicles,
instead
of
trying
to
pick
the
winners
in
the
end
market,
is
to
choose
the
manufacturers
of
those
common
components.
We
have
a
theme,
Bits
of
chips
is
actually
the
name
of
the
theme
that’s
focused
on
the
bits
of
the
chip
market,
the
bits
of
the
component
market
that
serve
as
a
common
underlying
supplier.
And
I
think
that’s
the
sort
of
theme
that
we’re
looking
at.
I
mean
very
broadly,
perhaps
as
a
concluding
comment,
I
would
say
that
we
observe
that
markets
overall
today
are
relatively
cautiously
positioned.
There’s
a
lot
of
people
who
think
that
cash
at
5%
is
a
good
place
to
be,
and
I
can
understand
that
in
the
near
term.
But
I
do
think
that
for
longer-term
investors
here,
this
is
a
great
entry
point
because
ultimately
wealth
creation
isn’t
done
by
having
all
of
your
wealth
in
cash
even
at
5%.
We
need
to
be
further
out
there
on
the
risk
curve
and
ultimately
buying
into
these
long-term
themes
at
a
moment
of
cyclical
weakness
has
generally
been
an
extremely
good
idea
for
investors.
KL:
Wonderful.
Thank
you
so
much
for
your
time,
Steve.
For
Morningstar,
I’m
Kate
Lin.
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